Detailed Narrative
Strong Q1 FY27 Performance and Strategic Divestment
Chandan Healthcare reported robust financial results for Q1 FY27, with consolidated sales growing 19.62% year-on-year to ₹82.26 crores. Consolidated EBITDA saw a significant increase of 42.27% year-on-year, reaching ₹20.98 crores, and the EBITDA margin expanded by 4.6 basis points to 25.51%. Net profit after tax (PAT) also grew by 29% year-on-year to ₹7.5 crores. A key strategic move was the divestment of the entire 53.56% shareholding in Chandan Pharmacy Limited for ₹16.77 crores in August, aimed at sharpening the focus on the higher-margin diagnostic business, which reported a standalone EBITDA margin of 36.57%.
Aggressive Network Expansion and Franchise Model Growth
The company demonstrated aggressive network expansion, adding 134 franchise centers during Q1 FY27, bringing the total franchise network to 264 centers. Management has accelerated its target, now aiming for 1,000 franchise centers by the end of this financial year and 3,000 within the next two years. This capital-efficient franchise model requires zero capex from Chandan, with owners investing approximately ₹1 lakh and earning ₹50,000 to ₹1-2 lakhs per month. Chandan retains a minimum 50% share of MRP, with its effective margin from this business exceeding 60% due to no capital investment, and a PAT margin averaging 65%.
Strategic Growth Initiatives and New Service Offerings
Chandan Healthcare is actively working on several strategic initiatives to bolster its diagnostic capabilities. Eight comprehensive diagnostic centers are nearing completion and are expected to be operational within the next 3-4 months. Additionally, plans include opening more than six new diagnostic centers, a specialized genome lab in Lucknow within six months, and two PET scan machines in Kanpur and Gorakhpur within 2-3 months. The company is also pursuing a 'One District One Lab' blueprint, aiming to establish a lab in every district across Uttar Pradesh and Uttarakhand within the next two years.
Robust Business Mix and Segment Performance
The company witnessed healthy growth across all major business verticals. The B2B business grew significantly by 94% year-on-year, while B2C (referrals from doctors) and online business grew by 29% and 20% respectively. Pathology services accounted for 74% of standalone diagnostics revenue, with radiology contributing 25.86%. Management aims to maintain a balanced business mix with approximately 33% contribution from B2C, B2B, and B2G segments, while consciously keeping B2G business below 40% to manage receivable risks.
Financial Outlook and Profitability Targets
Looking ahead, management expressed confidence in achieving over 50% year-on-year top-line growth for the standalone diagnostic segment for the next three years, driven by ongoing expansions. They anticipate reaching a 40% EBITDA margin at the company level 'very soon, maybe in a few months,' up from the current 36.57% for standalone diagnostics. The expansion strategy, coupled with the high-margin franchise model, is expected to drive sustainable growth and improved profitability.
Progress on Government Projects
The company is making steady progress on its government-led projects. In Punjab, 8 out of 12 radiology centers have been secured and are expected to be operational within the next two to three months. The Guwahati center will commence radiological services this month, with full services expected within three months. These projects are part of the broader strategy to expand presence across additional partners' facilities and are expected to contribute to the company's growth.